Agenda item

The Committee considered the Treasury Management Annual Report 2021/22 which provided a summary of the Council’s treasury position on 31^st March 2021 and 31^st March 2022. In line with the CIPFA Code of Practice for Treasury Management and the Council’s Financial Regulations, the Council was required to provide the Audit and Governance Committee with a report on the previous year’s treasury management activity. Mr Richard Ambrose, Service Director for Major Projects and Ms Julie Edwards, Pensions and Investments Manager attended to present the report and take questions from the Committee.

In overall budget terms, the Council ended up £1.398m net better off during the year, despite an underachievement of £0.303m on treasury investment returns due in part to the low rates of interest available. Another factor was the continuation of the Council’s strategy to use surplus cash instead of borrowing (known as internal borrowing), which led to an underspend against budget on borrowing costs of £1.701m. The overall favourable variance had been taken into account in the 2022/23 budget. The Council would continue the strategy of internal borrowing, which reduced risk and kept external financing costs low, while it made sense to continue to do so. Liquid cash was diversified over several counterparties and Money Market Funds to manage both credit and liquidity risks. Such an approach had also provided benefits in terms of reducing counterparty risk exposure, by having fewer investments placed in the financial markets. Recent increases in interest base rates should improve future investment returns, however Public Loans Work Board (PWLB) borrowing had increased and as such, new borrowing would cost slightly more. The investment activity during the year conformed to the approved strategy and the Council had no liquidity difficulties.

During discussion, points raised included:

• The Committee noted the significant amount of funds held in cash and were advised that there was not a target cash amount set in the 22/23 strategy, although £10m was noted as the previous target for 2021/22. It was explained that part of the reason for the high cash levels was the aim to use internal borrowing where possible, as opposed to external borrowing which was more expensive. This would be kept under review as interest rates had started to move over recent months. The new strategy took account of increasing interest rates, although mitigating the impact of inflation was particularly difficult.
• A Member requested that a supporting table be provided to the Committee to provide a greater understanding and context of the figures referred to in paragraph 1.1 of the report. It was also noted, that the first paragraph in 1.2 of the report was duplicated in 2.7 of the report.

ACTION: Ms J Edwards to provide a table for circulation to the Committee

• The Committee heard that much of the approximately £300m borrowing was over fixed periods. When the budget was set for 2022/23 it was assumed there would be a greater level of borrowing, however because of either capital slippage or internal borrowing, this had not been the case.
• The Committee requested that a treasury management session be held with Members to provide greater detail on volatility around rates and how inflation and cash flow would be managed moving forward.

ACTION: Ms J Edwards / Mr R Ambrose to liaise with LINK Treasury Management Advisors with an aim to set a session up prior to the next meeting of this Committee in September.

• The sign off process for investing in to other local authorities was welcomed, the Committee heard that since the process was in place, there had not been any further local authority investment although the team was keeping an up to date list of those authorities who had been issued a Section 114 notice or were known to be in financial difficulties. There had been previous investments made in authorities who had been issued Section 114 notice which had matured, with others due to mature. The investment in Slough Borough Council was highlighted, this was due to mature in October and there were not expected to be any issues over this money being returned

RESOLVED:

That the Treasury Management Annual Report for 2021/22 be noted.